Sterling climbs as warm weather boosts retail sales

Enrique Díaz-Álvarez22/May/2015Currency Updates


Sterling climbed to its highest level against the Euro in two months and soared by 0.8% against the Dollar after an impressive set of retail sales figures.

Retail sales in the UK surged in April, far above forecasts, as unusually warm weather encouraged shoppers to spend more. Sales volumes jumped by 4.7% on an annualised basis and by 1.2% month on month, much higher than the 3.7% and 0.4% that was previously expected. The large increase in sales was in part due to greater purchases of clothing, textiles, and footwear, which jumped by 5.2% to mark its greatest monthly rise in four years. Yesterday’s data was in sharp contrast to March, where a drop in fuel prices caused sales to plunge by 0.7%. The data also provides evidence that the modest slowdown in the economy in the first quarter may prove to be short lived.

Public sector borrowing figures for April released at 9.30am this morning will the only major data announced today. Later this afternoon, Bank of England Governor Mark Carney will be speaking at the ECB forum on Central Banking in Portugal.


The single currency traded within a narrow band against the US Dollar for a second successive day on Thursday, and ended 0.75% lower on the Pound.

The accounts of the latest ECB monetary policy meeting showed policymakers are satisfied with the start of their historic quantitative easing program. Members agreed that emphasis should be focused on a “steady course of monetary policy”. While the initial results of the QE program were encouraging, the report suggests the Eurozone will continue to be subject to a number of downside risks and uncertainties. Now in its third month, the bond buying scheme has already notched up 136 billion Euros in public-sector bond purchases.

The impressive uptick in manufacturing performance continued yesterday with a better than expected flash PMI from Markit. The index rose to a multi month high 52.3 despite a slight slowdown in manufacturing activity in Germany. In contrast, the services sector suffered an unexpected dip in growth, down marginally to a PMI of 53.3. Elsewhere, in a low key appearance, central bank President Mario Draghi claimed growth was too low everywhere in Europe, despite conditions improving somewhat of late.

Growth figures for Germany will be released before markets open in the UK this morning. This will be followed by a couple of speeches from Mario Draghi at the ECB forum, first at 9am and then 2.30pm BST.


The Dollar index was mostly unchanged on Thursday, down by 0.1%.

There were no major announcements in the US on Thursday, although plenty of data was released across the pond. Growth in the US manufacturing sector slowed for a second month. The flash PMI released by Markit declined from 54.1 in April to just 53.8 in May. The Conference Board’s leading indicator, a measure of overall economic activity, jumped in April, widely surpassing most expectations and forecasts. The index rose by 0.7% to 122.4 following a 0.4% increase in March. In other announcements, the Philly Fed manufacturing survey declined to 6.7, while initial jobless claims increased marginally, although remained impressive, at 274,000 for last week. Elsewhere, Federal Reserve member Stanley Fischer turned attention to the Eurozone, claiming he believed Greece would survive its current crisis.

Traders today will await the announcement of inflation data in the US for April, set for release at 1.30pm UK time. The consumer price index is expected to remain negative for the second consecutive month.

Rest of the world

There was more bad news for the Brazilian economy. The economic activity index, seen as a good measure of economic growth, fell by 0.8% in Q1. The economy is now expected to shrink 1.2% this year, the worst decline in 25 years.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.